The US petrochemical sector is in the midst of one of the
largest industry expansions to ever occur in North
America. Cheap, readily available shale gas is sparking a surge
in the construction of new processing capacity. Total announced
capital investments in capacity expansions, upgrades, plant restarts
and greenfield facilities have climbed to over $100
billion (B). No greater example of this resurgence of the US petrochemical industry is better
illustrated than in the construction of new ethylene and methanol (MeOH) capacities
(Table 1).

One of the largest impacts in the US will be in new ethylene
capacity. Companies such as Axiall, Chevron Phillips Chemical
(CPChem), Dow Chemical, ExxonMobil, Sasol, Shell and
LyondellBasell will be instrumental in adding over 10 million
tons per year (MMtpy) of new US ethylene capacity by 2018.

The shale gas boom has also propelled MeOH production to the
forefront of the US petrochemical sector. Cheap natural gas feedstock has spurred a boom in MeOH
plant construction, expansions, plant restarts and even
plant relocations from other regions around the globe. The US
plans to add over 10 MMtpy of additional MeOH output capacity
by 2018. This capacity represents more than $8.5 B in new project investments over the next
four years.

However, the US MeOH outlook was reversed in the early years
of the new millennium, when spiking domestic natural gas prices
shrunk the US MeOH industry substantially. By the early 2000s,
the number of operating US MeOH plants had shrunk from 18 to
10. Domestic MeOH processing capacity dwindled from over 7
MMtpy to well under 3 MMtpy. This made the US more dependent on
imports from countries such as Trinidad and Tobago, Chile,
Venezuela, Equatorial Guinea and Canada. By the end of 2013, US
MeOH imports had climbed to 5.5 MMtpy.

Within the next three years, however, US imports of MeOH are
not only expected to cease, but the US is also expected to
become a net exporter of this sought-after chemical.

Installed capacity

The MeOH industry spans the entire globe. Presently, over
100 MeOH plants are in operation around the globe, representing
over 100 MMtpy in total processing capacity. MeOH is used in
many applications, mainly in the creation of acetic acid and
formaldehyde. Acetic acid and formaldehyde are basic building
blocks for the creation of products such as paints, coatings,
plastic resins, adhesives, disinfectants and even embalming
fluid.

The US will utilize its cheap natural gas feedstock to become self-sufficient
in MeOH production by 2018. Major facilities have been planned,
mainly along the US Gulf Coast in Texas (TX) and Louisiana
(LA). These projects include multiple billion-dollar
mega-projects with capacities of over 1 MMtpy.

The following is an overview of major MeOH projects in the
US. This information is primarily derived from Hydrocarbon Processings
Construction Boxscore Database.

Methanex

The corporation is the global leader in MeOH production.
Methanex is in the process of relocating two idled MeOH plants
from its Chile site to Geismar, Louisiana. The project consists
of the dismantling, relocation and reassembling of two 1-MMtpy
MeOH plants, Geismar 1 and Geismar 2. The total cost of the
project is expected to reach $1.1 Ban estimated $550 MM
per plant.

Geismar 1 will be Methanexs first US-based MeOH
production facility constructed in over a decade. Methanex
began to dismantle the Chilean plant in mid-2012. Shipments of
the plants infrastructure began in early 2013, shortly
after Methanex signed a 10-year natural gas supply contract
with Chesapeake Energy Corp. All modules and equipment reached
the 225-acre Geismar site in early 2014. Reassembly is expected
to take six to seven months. The plant is scheduled to be
operational by the end of 2014.

In early 2013, as Geismar 1s modules and equipment
were loaded onto specially designed ocean vessels for the
7,500-mi journey, Methanex greenlighted the relocation of a
second 1-MMtpy MeOH plant, Geismar 2. This facility is expected
to be fully operational by early 2016.

Celanese

The company plans to establish two MeOH facilities in Texas. The first is a
1.3-MMtpy plant located at its existing Clear Lake, TX
facility. Celanese is developing the project with Tokyo-based
Mitsui & Co. The equal joint venture (JV) will invest $800
MM in the development of the plant. WorleyParsons will provide
engineering, procurement and construction (EPC) management
services for the plant. Completion is scheduled for
mid-2015.

Celanese plans to build an additional 1.3-MMtpy MeOH plant
at its petrochemical facility in Bishop,
TX. The plant will utilize natural gas sourced from the nearby
Eagle Ford shale. The Bishop MeOH plant will mirror the size
and scope of the Clear Lake plant. Total capital expenditure is
expected to reach $700 MM$800 MM. Presently, Celanese is
preparing the necessary environmental permits for the plant.
If greenlighted, the plant should be operational in
2017/2018.

Valero

The company is spending $700 MM to construct a 1.6-MMtpy
MeOH facility. The complex will be located adjacent to its St.
Charles refinery in Norco, LA, about 25 mi
west of New Orleans. The project is the largest investment
Valero has made in the petrochemical sector, and it is expected
to be operational by the second quarter of 2016.

OCI

Following on the success of its Beaumont, TX facility, OCI,
through its subsidiary, Natgasoline, will build one of the
largest MeOH plants in the US. The 1.75-MMtpy, world-scale
facility will be located on a 514-acre plot in Beaumont, TX.
The $1-B plant will utilize Air Liquides Lurgi MegaMethanol process technology.

Air Liquides engineering and construction division,
Air Liquide Global E&C Solutions, will provide the design
of all basic engineering works for the plant. These include
detailed design, engineering and the procurement of proprietary
equipment. The plant is expected to be operational by the end
of 2016.

Northwest Innovation Works

The company intends to build twin billion-dollar MeOH plants
at the Port of Kalama, Washington (WA), and at Port Westward on
the Oregon (OR) side of the Columbia River. Each plant will
have a capacity of 5,000 tons per day (Mtpd), which equals
1.825 MMtpy.

The project is being developed by Northwest Innovation Works
(NWIW). NWIW was formed at the beginning of 2014 as a JV among
PPE, Shanghai Bi Ke Clean Technology, Dalian Xizhoug Island Petrochemical Park and Silicon
Valley-based private equity firm H&Q Asia Pacific.

NWIW will invest approximately $3.8 B on the construction of
the two plants. The $1-B Port Westward facility will be
constructed on an existing industrial park owned by the Port of
St. Helens. The Port of Kalama plant will be constructed in two
phases, at a cost of $1.8 B. The MeOH produced will be shipped
to Dalian, China for olefins production. Construction of both
plants is expected to begin in late 2014. MeOH shipments are
scheduled to begin in 2018.

South Louisiana Methanol

South Louisiana Methanol (SLM) is a JV between
TX-based Zero Emission Energy Plant and its financial backer,
Todd Corp., a private company located in New Zealand. SLM is
building a 5-Mtpd (1.825-MMtpy) MeOH plant in St. James Parish,
LA. The $1.3-B facility will be located along the Mississippi
River in close proximity to intrastate and interstate natural
gas pipelines, deepwater ports and the major industrial hubs of
Baton Rouge and New Orleans.

Fluor was awarded the engineering and design contract in
September 2013. Fluor will prepare a detailed EPC execution
plan, a cost estimate and a detailed schedule. Fluor has
selected Johnson Matthey Davy Technologies MeOH
processing technology for the plant.
Construction is scheduled to begin in the third quarter of
2014, with an initial startup date of the fourth quarter of
2016.

G2X Energy

Construction of Phase 1 of G2X
Energys Pampa, TX plant began in early 2013. The plant
will use natural gas from local sources to produce 65 Mtpy of
MeOH. G2Xs partner, Southern Chemical, will market the
MeOH to customers in the TX Panhandle. Phase 1 completion is
scheduled for June 2014.

G2X is also developing a methanol-to-gasoline (MTG) complex
in Lake Charles, LA. The $1.3-B facility will utilize
ExxonMobil Research and Engineerings MTG process technology. The plant will convert
130 million cubic feet per day of dry natural gas into MeOH,
and then convert MeOH to conventional gasoline. The 12,500-bpd
plant is scheduled to begin operations in early 2017.

LyondellBasell

In December 2013, LyondellBasell restarted its MeOH plant in
Channelview, TX. The 780-Mtpy plant sat idle for almost 10
years due to high domestic natural gas prices. In late 2011,
with the advantage of low-cost shale gas feedstock emerging in the US, the
company invested $150 MM in the upgrade and restart of the
facility.

This project is one in a series of Gulf Coast projects by LyondellBasell. The
company plans to spend approximately $1.5 B on new capacity
additions. These additions include new ethylene and
polyethylene capacities at facilities in Channelview, La Porte,
Corpus Christi and Matagorda County, TX. HP

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